Compared to the fourth quarter of fiscal 2017, Applied net sales increased slightly to $4.01 billion. On a GAAP basis, the company recorded gross margin of 44.3 percent, operating income of $1.02 billion or 25.3 percent of net sales, and earnings per share (EPS) of $0.89.

On a non-GAAP adjusted basis, over the same period, the company reported gross margin of 45.5 percent, operating income of $1.07 billion or 26.6 percent of net sales, and EPS of $0.97.

The company returned $946 million to shareholders through $751 million in share repurchases and dividends of $195 million.

Full Year Results

In fiscal 2018, Applied grew net sales by 19 percent to $17.25 billion. On a GAAP basis, the company recorded gross margin of 45.3 percent, operating income of $4.80 billion, and EPS of $3.23. On a non-GAAP adjusted basis, the company reported gross margin of 46.3 percent, operating income of $5.0 billion or 29.0 percent of net sales, and EPS of $4.45.

The company generated $3.79 billion in cash from operations, paid dividends of $605 million and used $5.28 billion to repurchase 102 million shares of common stock.

“In fiscal 2018, each of Applied’s major businesses delivered double-digit growth despite challenging conditions in the second half of the year,” said Gary Dickerson, president and CEO. “While near-term market headwinds remain, overall industry spending remains robust, and we are focused on positioning Applied Materials for the long term, expanding our role in the A.I.-Big Data era and winning the major technology inflections ahead.”

Results Summary

Change

Q4 FY2018

Q4 FY2017

FY2018

FY2017

Q4 FY2018 vs. Q4 FY2017

FY2018 vs.FY2017

(In millions, except per share amounts and percentages)

Net sales

$

4,014

$

3,969

$

17,253

$

14,537

1

%

19

%

Gross margin

44.3

%

45.0

%

45.3

%

44.9

%

(0.7) points

0.4 points

Operating margin

25.3

%

27.7

%

27.8

%

26.6

%

(2.4) points

1.2 points

Net income

$

876

$

982

$

3,313

$

3,434

(11

)%

(4

)%

Diluted earnings per share

$

0.89

$

0.91

$

3.23

$

3.17

(2

)%

2

%

Non-GAAP Adjusted Results

Non-GAAP adjusted gross margin

45.5

%

46.2

%

46.3

%

46.1

%

(0.7) points

0.2 points

Non-GAAP adjusted operating margin

26.6

%

28.7

%

29.0

%

27.9

%

(2.1) points

1.1 points

Non-GAAP adjusted net income

$

956

$

1,005

$

4,569

$

3,525

(5

)%

30

%

Non-GAAP adjusted diluted EPS

$

0.97

$

0.93

$

4.45

$

3.25

4

%

37

%

A reconciliation of the GAAP and non-GAAP adjusted results is provided in the financial tables included in this release. See also “Use of Non-GAAP Adjusted Financial Measures” section.

Business Outlook

In the first quarter of fiscal 2019, Applied expects net sales to be in the range of $3.56 billion to $3.86 billion; the midpoint of the range would be down approximately 12 percent, year over year. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.75 to $0.83; the midpoint of the range would be a decrease of approximately 25 percent, year over year.

This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.01 per share, the normalized tax benefit of share-based compensation of $0.04 per share, and net income tax benefit related to intra-entity intangible asset transfers of $0.02 per share, but does not reflect any items that are unknown at this time, such as any additional charges related to acquisitions or other non-operational or unusual items, as well as other tax related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.

Fourth Quarter and Fiscal Year Reportable Segment Information

Semiconductor Systems

Q4 FY2018

Q4 FY2017

FY2018

FY2017

(In millions, except percentages)

Net sales

$

2,309

$

2,431

$

10,903

$

9,517

Foundry

23

%

36

%

24

%

41

%

DRAM

26

%

12

%

27

%

16

%

Flash

34

%

38

%

36

%

34

%

Logic and other

17

%

14

%

13

%

9

%

Operating income

638

801

3,634

3,173

Operating margin

27.6

%

32.9

%

33.3

%

33.3

%

Non-GAAP Adjusted Results

Non-GAAP adjusted operating income

$

684

$

847

$

3,817

$

3,357

Non-GAAP adjusted operating margin

29.6

%

34.8

%

35.0

%

35.3

%

Applied Global Services

Q4 FY2018

Q4 FY2017

FY2018

FY2017

(In millions, except percentages)

Net sales

$

977

$

831

$

3,754

$

3,017

Operating income

289

232

1,102

817

Operating margin

29.6

%

27.9

%

29.4

%

27.1

%

Non-GAAP Adjusted Results

Non-GAAP adjusted operating income

$

290

$

232

$

1,104

$

821

Non-GAAP adjusted operating margin

29.7

%

27.9

%

29.4

%

27.2

%

Display and Adjacent Markets

Q4 FY2018

Q4 FY2017

FY2018

FY2017

(In millions, except percentages)

Net sales

$

702

$

677

$

2,498

$

1,900

Operating income

202

212

679

502

Operating margin

28.8

%

31.3

%

27.2

%

26.4

%

Non-GAAP Adjusted Results

Non-GAAP adjusted operating income

$

206

$

215

$

694

$

507

Non-GAAP adjusted operating margin

29.3

%

31.8

%

27.8

%

26.7

%

Use of Non-GAAP Adjusted Financial Measures

Applied provides investors with certain non-GAAP adjusted financial measures, which are adjusted for the impact of certain costs, expenses, gains and losses, including certain items related to mergers and acquisitions; restructuring charges and any associated adjustments; impairments of assets, or investments; gain or loss on sale of strategic investments; tax effect of share-based compensation; certain income tax items and other discrete adjustments. Additionally, the fourth quarter and fiscal 2018 non-GAAP results exclude estimated discrete income tax expense items associated with changes to recent U.S. tax legislation. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.

Management uses these non-GAAP adjusted financial measures to evaluate the company’s operating and financial performance and for planning purposes, and as performance measures in its executive compensation program. Applied believes these measures enhance an overall understanding of our performance and investors’ ability to review the company’s business from the same perspective as the company’s management, and facilitate comparisons of this period’s results with prior periods on a consistent basis by excluding items that we do not believe are indicative of our ongoing operating performance. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles, may be different from non-GAAP financial measures used by other companies, and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.

Webcast Information

Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast will be available at www.appliedmaterials.com. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today.

Forward-Looking Statements

This press release contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks and demand drivers, technology transitions, our business and financial performance and market share positions, our capital allocation, our investment and growth strategies, our development of new products and technologies, our business outlook for the first quarter of fiscal 2019, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products; global economic and industry conditions; global trade issues and changes in trade policies; consumer demand for electronic products; the demand for semiconductors; customers’ technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology transitions; our ability to develop, deliver and support new products and technologies; the concentrated nature of our customer base; our ability to expand our current markets, increase market share and develop new markets; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives, align our resources and cost structure with business conditions, and attract, motivate and retain key employees; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; changes in U.S. tax laws and regulation, and our interpretations of them; and other risks and uncertainties described in our SEC filings, including our most recent Forms 10-Q and 8-K. All forward-looking statements are based on management’s current estimates, projections and assumptions, and we assume no obligation to update them.

About Applied Materials

Applied Materials, Inc. (Nasdaq: AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible the technology shaping the future. Learn more at www.appliedmaterials.com.

These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.

2

Applied adopted the accounting standard related to share-based compensation (ASU 2016-09) in the first quarter of fiscal 2018, which resulted in $51 million tax benefit on a GAAP basis for fiscal 2018; this benefit was being recognized ratably over the fiscal year on a non-GAAP basis.

3

Charges to income tax provision related to a one-time transition tax and a decrease in U.S. deferred tax assets as a result of the recent U.S. tax legislation.

4

Adjustment to provision for income taxes related to non-GAAP adjustments reflected in income before income taxes.

These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.

Note: The reconciliation of GAAP and non-GAAP adjusted segment results above does not include certain revenues, costs of products sold and operating expenses that are reported within corporate and other and included in consolidated operating income.